China quiet on U.S. currency report delay

By IBT Staff Reporter On 04/05/10 AT 2:48 AM

A Chinese central bank adviser said Beijing could ease pressure over the yuan by buying more from recession-hit U.S. states, but China had no official reaction on Monday to the Obama administration's delay of a contentious currency report.

Monday was a public holiday in China, with government offices closed and state newspapers issuing slimmed down editions.

Treasury Secretary Timothy Geithner on Saturday postponed the report, originally due out on April 15, that could have called Beijing a currency manipulator.

The decision follows Thursday's announcement that Chinese President Hu Jintao will attend a nuclear security summit meeting in Washington April 12-13 and seems to be a move to keep tensions over currency in check.

Geithner said he would use meetings of the Group of 20 and a U.S.-China strategic dialogue in Beijing in May to urge China to budge on the yuan, which President Barack Obama, many U.S. lawmakers and several economists say is kept artificially low, undercutting U.S. competitiveness.

Several Chinese economists quoted in the overseas edition of the People's Daily, the official newspaper of China's ruling Communist Party, maintained that the yuan was not to blame for the U.S. trade deficit. The economists appeared to have commented before Washington announced the postponement of the report.

Trade deficits and surpluses are not created by exchange rates, and the renminbi is not undervalued, said the paper.

Li Daokui, a member of the central bank's monetary policy committee, said China could nonetheless buy more goods from U.S. states struggling with recession to ease pressure from the White House and Congress.

On the one hand, China needs to maintain the initiative in issuing information (about the yuan), so that there is no misunderstanding of China by the United States, the paper cited Li as saying.

On the other hand, China should take the initiative to communicate with the United States, added Li, a professor at Tsinghua University in Beijing.

China can increase purchases from (U.S.) states facing mass unemployment because of recession in the manufacturing sector, said Li, a Harvard-trained economist.

Beijing let the yuan rise 21 percent against the U.S. dollar between July 2005 and July 2008 before effectively repegging the currency, also called the renminbi, near 6.83 to the dollar to help the economy through the financial crisis.

The United States' deficit in trade with China fell to $227 billion in 2009 from a record $268 billion in 2008,. but the Obama administration is keen to lift exports and employment.

Wu Xiaoling, a Chinese lawmaker and former central bank vice governor quoted by the People's Daily international edition, said the root of the problem was not a cheap yuan, but the relatively low cost of labor and resources in China.

That people feel the renminbi is undervalued is in fact because many price factors in China, including resources and labor, have not reached international levels, she said.